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China demand buoys wheat, corn

04/23/2012 @ 3:29pm

U.S. wheat futures closed higher Monday amid weather risks for the winter-wheat crop and higher Chinese demand.

Wheat for May delivery closed up 9 1/4 cents, or 1.5%, at $6.25 a bushel at the Chicago Board of Trade. Kansas City Board of Trade May wheat rose 9 1/4 cents to $6.35 1/4, while May wheat rose 3/4 cent to $7.91 3/4 a bushel at the MGEX in Minneapolis.

Cool temperatures in Kansas overnight raised concerns about possible frost damage to wheat crops there, although analysts said any harm was likely minimal. Forecasts for temperatures to drop in parts of the Midwest in the coming days also raised the prospect of lower yields for the winter-wheat crop.

"Today really was a game of weather fear," said Dale Durchholz, an analyst with AgriVisor, an agricultural-advisory firm in Bloomington, Ill.

Wheat prices also received a boost from higher Chinese imports of U.S. wheat. Chinese customs data released Monday showed the country's imports of wheat from the U.S. in the first quarter surged more than 50-fold to 120,299 metric tons. China's wheat imports from countries including Australia also rose.

Analysts said the higher imports suggested livestock producers in China are using more wheat to feed animals than they have in the past. Wheat and corn prices are linked because both can be used as animal feed. High prices for corn and tight supplies have led to greater expectations for wheat usage in feed in China, the U.S. and elsewhere this year.

Wheat futures rose despite significant pressure from outside markets, as equities and crude oil traded lower Monday, while the dollar was stronger.

Wheat's rise "has been particularly impressive with the outside markets being down so hard today," said Dan Manternach, wheat economist for Doane Advisory Services, an agricultural-advisory firm in St. Louis.

Wheat prices also benefited from concerns a selloff on Friday was too sharp.

Still, wheat's upside remained limited by a high level of global wheat supplies and favorable conditions overall for the U.S. winter wheat crop, and for planting of spring wheat.

Farmers are expected to begin harvesting winter-wheat crops in Kansas and other states in June.

May futures of hard red spring wheat struggled at MGEX, trading in negative territory in the morning before closing slightly higher. Traders said market participants were selling MGEX futures and buying CBOT or KCBT winter wheat to take profits on spread positions, in which they had bet on Minneapolis wheat outperforming wheat at the other two exchanges.

Separately, corn futures also rose on weather risks and heightened Chinese demand. China's customs data showed the country's first-quarter corn imports surged to nearly the volume imported in the whole of 2011. Almost all of the trade was with the U.S.

CBOT May corn closed up 10 cents, or 1.6%, at $6.22 1/2 a bushel.

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